Tuesday, Oct 20, 2015
Dubai: The new Commercial Companies Law (CCL) of the UAE enacted in April this year is a big leap forward in creating a sustainable private sector growth model in the UAE, while a lot more fine tuning is expected in the future, the basic framework is robust, according to experts.
Speakers participating in a panel discussion ‘The new Commercial Companies Law, implications from business,’ organised by Dubai Economic Council (DEC) and the Supreme Legislation Committee of Dubai in partnership with law firm Al Tamimi & Co. said the provisions of the new law has enhanced clarity in the scope of private sector investments in the country.
In contrast with the old law, the new CCL explicitly sets out a bold objective to contribute to the development of the working environment in the UAE, and to the capacity of the UAE to regulate companies according to international norms, protection of shareholders, the support of foreign investment and promotion of corporate social responsibility.
“Private sector has been playing a key role in the economy of the UAE. The new companies law, a significant improvement over the old law is a clear recognition of the importance of a well regulated private sector in the country,” said Hani Al Hamli, Secretary General of DEC.
The government representatives, legal experts and members from the business fraternity agreed that the new legal framework will improve capital flows into the country in terms of foreign direct investments, improved domestic investments and overall competitiveness of the UAE economy. But a few panelists also suggested that the law need more clarity on 100 per cent foreign ownership in onshore companies and the possibility of free zone companies doing business in the UAE, outside their designated free zones.
“Private sector is certain to benefit from the evolving legal framework in the country. The new CCL is just one aspect of it. The provisions in the new law relating to creation of holding companies one such example the will go a long way in facilitating merger’s and acquisitions and foreign direct investment,” said Tareq Hajjiri, director of legal policy at DEC.
The CCL chapter which governs LLCs envisages the establishment and registration of sole proprietorships as LLCs, and that an LLC may be incorporated and held by one natural or corporate person.
“The very fact that the new law allows setting up LLCs with a single shareholder points to the possibility of 100 per cent foreign ownership and to that extent this piece of legislation could be a precursor to new on-shore company ownership law,” said Samer Qudah, Partner and head of corporate structuring department at Al Tamimi &Co.
Experts said the new law gives scope for further fine tuning of some of the provisions while addressing some of the gaps. “While the enactment of the new CCL in itself has come as a big surprise after a long wait, it has addressed a number of concerns on the private sector. It certainly is going to ease fund raising through capital markets,” said Khaled Sifri, CEO of Emirates Investment Bank.
Emphasising the role of legislation in enhancing ease of doing business, Sifri said, in the developing world there is a tendency to focus excessively on investor protection. “In the developed world law is more agnostic on investor protection, leaving the responsibility to specialised regulators while creating a mechanism for companies to do business with ease,” he said.
On funding, the new law permits shareholders in LLCs to pledge their shares. Easing to rules relating to flotation of a company is widely welcomed. The existing rules require PJSCs to float at least 55 per cent. The New CCL reduces the proportion that must be floated to 30 per cent, allowing founders to retain a majority (up to 70 per cent) of their company.
The new UAE CCL has been anticipated for long and considerable thought has gone into strengthening shareholder protection, enhancing corporate governance and generally making investment in UAE companies easier. Despite the clear improvements, there is a sense that the new law could have gone further in bringing more clarity on several aspects which many experts hoped would eventually happen.
By Babu Das Augustine Banking Editor
Gulf News 2015. All rights reserved.
